Get ready and roll up your sleeves for the work ahead. The Stark and AKS Final Rules became effective January 19, 2021, with the exception of certain changes to the definition of a group practice that have an effective date of January 1, 2022 to give physician practices time to adjust their compensation methodologies. The exception permits both monetary and nonmonetary remuneration between the parties. Government scrutiny around healthcare transactions has heightened in recent years due to an increase in the volume of violations of healthcare fraud and abuse laws. 7. Distribution of Profits Related to Participation in a Value-Based Enterprise; b. The US Court of Appeals for the Third Circuit endorsed two controversial interpretations of the Stark Law's "volume or value" standard, known as the correlation theory and the practice "loss" theory in U.S. ex rel. The commenters are incorrect that this is CMS policy. Clearly, from CMS perspective, both referenced policies are misguided. The bottom line is that in the context of fair market value and the Stark Law, normal business negotiations allowing for leverage between parties is not necessarily the same in the healthcare context (because the parties cannot take into account that they generate business for one another). The Anti-Kickback Statute. Since the Stark Law was enacted in 1989 this been a compliance concern in the back of the minds of hospital executives. Financial arrangements are commercially reasonable if they are at FMV, services provided are documented and deemed necessary, and when the services cannot be provided at a lesser value. Three new safe harbors for remuneration exchanged between or among participants in value-based arrangements: Value-based arrangements with full financial risk. Provides new exceptions for value-based compensation arrangements that meet certain financial risk requirements and provides new definitions for value-based activity; value-based arrangement; value-based enterprise (VBE); value-based purpose; VBE participant; and target patient population. Finally, the incentives in a healthcare environment are inherently different than they are in a business venture in other industries. Directions Additionally, until now, there has been no codified definition for commercial reasonableness, only limited CMS discussion such as that in the proposed 1998 rule. 1395nn). HHS, through the Regulatory Sprint to Coordinated Care, has a stated goal of reducing regulatory barriers within our nations health care system and accelerating the transformation of the health care system into one that better pays for value and promotes care coordination. As HHS statement indicates, value-based arrangements and transactions are the focus of this episode of Stark Law and AKS revisions, but other areas and central ideas of the Stark Law and AKS are significantly impacted as well. Many of these reasons are out of the hospital or health systems control. Jana will be discussing the Stark Law changes, and Angie will be providing related valuation examples during the September 13, 2022 Let's Talk Compliance webinar entitled Stark Law Changes and Impact on Physician Compensation Part 2. Eliminating the period of disallowance rules and correcting discrepancies during the arrangement. Factors affecting the specific company risk of a practice can include the physician's age, specialty, location, market position, payer mix, payer contracts, size, and other factors. An assessment of transactions should be done to analyze if it is reasonable to pay for the services in the first place, in order to prevent violation of the Anti-Kickback Statute. If base or guaranteed compensation does not exceed the 75th percentile for the physicians specialty, as published by a survey source like the Medical Group Management Associations Provider Compensation Survey, then they do not seek a fair market value opinion because they consider the compensation to be fair market value. Specialties like critical care, hospital medicine, emergency medicine, and pulmonary medicine may have experienced increases in patient volume due to the pandemic. \text{X} & \text{7.210} & \text{1.3626} & \text{5.29}\\\\ These statutes currently reside under the purview of Centers for Medicare & Medicaid Services (CMS) fraud and abuse laws. Fair market value is defined to mean the "value in an arm's length transaction, consistent with general market value of the subject transaction" (42 CFR 411.351). 57 The amended provisions are for the Stark Law exceptions for academic medical centers, bona fide employment relationships, personal service arrangements, certain physician incentive plans, group practice arrangements with a hospital, fair market value compensation, indirect compensation arrangements, and the new exception for limited . 4 See 42 CFR 411.354. This Stark Law exception applies to physician compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken by the VBE or any of its VBE participants. A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. 7. On the other hand, an arrangement must be considered fair market value in order to be commercially reasonable. Louisville, Kentucky 40241, 2023 HSG Advisors. 1395nn, and the regulations and guidance promulgated thereunder. <p> Fair Market Value (FMV) has become an industry standard in accordance with regulations and statutes such as the US Sunshine Act, False Claims Act, and Anti-Kickback Statute, as well as international transparency reporting and anti-corruption legislations. recently sold and the following computer output was obtained. However, we agree with the commenter that asserted that a hospital may find it necessary to pay a physician above what is in the salary schedule, especially where there is a compelling need for the physicians services. Despite the request and urging of commenters, CMS declined to establish rebuttable presumptions that compensation is fair market value or safe harbors that would deem compensation to be fair market value if certain conditions are met. Bottom line, CMS affirmed that there is no guarantee to fair market value determinationthere is no universal formula or proverbial rubberstamp as it pertains to provider compensation. The Stark law prohibits a physician with a financial relationship in an entity from making a referral for designated health services covered by Medicare and Medicaid to that entity even if the services are billed to an individual or other third party payer. With the increased rate of mergers and acquisitions, healthcare organizations are vulnerable to federal scrutiny. If Internal Revenue Services (IRS) determines that the net earnings of a tax-exempt organization are used for private interests of employees, or if their payments exceed FMV, it might result in loss of tax-exempt status. Carnahan Group. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment or tax advice or opinion provided by Carnahan Group to the reader. B and C - obtain a certified valuation from an expert, third party & conduct an in-house valuation . Contact our expert, Neal D. Barkeratnbaker@hsgadvisors.com or call (502) 814-1189. In doing so, CMS offered helpful commentary for health care entities structuring real estate arrangements. Thanks for reaching out. If the AKS is addressing criminal penalties, the consequences include fines up to $25,000 per violation and up to a five-year . the value in an arm's-length transaction that is consistent with general market value. In the Court's opinion, the excess payments would violate the Stark Law and would make claims made to Medicare for those services false claims. 1395 nn) and antikickback statutes (42 U.S.C. Referring to survey data regarding practice losses per physician and per provider can be enlightening. As you can see, the definition of fair market value does not provide details with respect to what is fair market value. The Final Rule of the Stark Law revises the definitions of Fair Market Value and includes a definition of General Market Value to better align with actual practices without unduly restricting innovative relationships between physicians and entities providing designated health services. Therefore, the analysis is recommended to be conducted by an independent valuation expert to establish a value that is consistent with independently published surveys that are comparable for similar services. The Situation: The isolated transactions exception under the Stark Law has been used by some providers and entities to retroactively protect services arrangements that do not qualify for personal services or fair market value compensation exceptions because, for example, the arrangements were not reduced to writing before services were rendered. You can contact me at 865-673-0844. CMS removed "general market value" from the definition of "fair market value" at 42 C.F.R. Allows the electronic health records (EHR) exception to be unending and allows limited donations of cybersecurity that are necessary for EHR, flexible physician payment schedules, and donations of replacement EHR items. Structuring legally compliant hospital-physician leases and establishing fair market value (FMV) rental rates can be challenging. 411.355 General exceptions to the referral prohibition related to both ownership/investment and compensation. An arrangement may be renewed any number of times if the terms of the arrangement and the compensation for the same items or services do not change. A "Stark" Difference in Fair Market Value and Commercial Reasonableness Is Coming in 2021. On December 2, 2020, the Centers for Medicare & Medicaid Services ("CMS") finalized long-awaited changes to the rules under the Physician Self-Referral Law, known as the "Stark Law." As discussed in our publication in 2019, CMS proposed the regulatory revisions in part to resolve uncertainty surrounding the terms "commercially reasonable . On February 9, 2018, Congress passed and President Trump signed into law H.R. 3 See 42 U.S.C. There are numerous laws across the country that have been created to remove this unethical practice. Again, job posting sites have been invaluable to determining fair market value for high-demand services. I. L. Fair market value of health care transactions. Healthcare employment contracts must: 1) Have a duration of at least a year. The fact is hospital-owned practices typically lose moneyit is more the rule than the exception. stark law fair market value industry best practice. ; (2) How can it be fixed? The following definition is from the regulations: means the value in arm's-length transactions, consistent with the general market value. Strategy, market growth, and larger referral bases were not among the examples. B. Stark Law Exception - Value-Based Arrangements . The writing specifies the compensation that will be provided under the arrangement. Likewise, a belief that paying a provider above the 75th percentile is not fair market value is also misplaced. Looking for help navigating the Stark Law Final Rule? 411.356 Exceptions to the referral prohibition related to ownership or investment interests. The Stark Law defines FMV as "the value in arm's length transactions, consistent with general market value". On November 20, the Centers for Medicare & Medicaid (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) issued a 627-page final rule which will serve to modernize and clarify Stark Law regulations. Value-based arrangements with substantial downside financial risk (at least 5%). Typical compensation per Work Relative Value Unit rates could be significantly off from traditional levels for given specialties. Interpretation of the "Volume or Value Standard" for Purposes of the Group Practice Regulations ( 411.352(g)) 2. Refines when a physician practice is required to sign a recruitment agreement between a hospital and a physician as well as timing issues for arrangements between a physician and non-physician practitioner (NPP) when a hospital is involved in compensating the NPP. The previous definition of fair market value stated that physician compensation "must be set in advance, consistent with fair market value, and not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.". For most Stark Law exceptions to apply, a(n) ___________________ is required. Not that CMS made it easy by providing a bright line or even a floor that would allow us to say, if we go above this level, then we must get a formal thirty-party fair market value opinion. According to CMS, We wish to be perfectly clear that nothing in our commentary was intended to imply that an independent valuation is required for allcompensation arrangements.. 411.362 Additional requirements concerning physician ownership and investment in hospitals. Consult with healthcare counsel to review compensation arrangements to identify any structures that take into account the volume or value of referrals or business The three types of transactions are asset acquisition, compensation, and rental of equipment or office space. This ensures that there is maximum compliance of regulatory statutes and prevents any violation of healthcare laws. In 2004, CMS noted that valuation methods under Stark Law "must exclude valuation where the parties to the transaction are at arms-length but in a position to refer each other." 6 Because FMV under Stark Law does not "necessarily comport with the usage of the term in standard valuation techniques and methodologies," 7 a purely market . 98810.3;2988 \div 10.3 ; 298810.3;2 significant digits. \text{Constant} & \text{20.000} & \text{3.2213} & \text{6.21}\\ A qualitative analysis of the nature and scope of services performed, necessity of services, and comparability of services should be performed. A general journal is given in the Working Papers. These new rules, which significantly amend the existing laws, are a direct result of HHS Regulatory Sprint to Coordinated Care. Final Rules also provide guidance related to fundamental concepts under the Stark Law, including commercial reasonableness, the volume or value standard, and fair market value. On Wednesday, October 9, HHS proposed highly anticipated reforms to regulations implementing the Physician Self-Referral Law and the Federal Anti-Kickback Statute, as well as related civil . Ultimately, valuators likely will have to be creative and look back into past years surveys to evaluate trends and validate current survey data. Industry stakeholders have informed us that, because the consequences of noncompliance with the Stark Law are so dire, physicians and other healthcare providers may be discouraged from entering into innovative arrangements that would improve . Bob concentrates his . The arrangement does not violate the anti-kickback statute (section 1128B(b) of the Act), or any Federal or State law or regulation governing billing or claims submission. On November 20, the Centers for Medicare & Medicaid (CMS) and the Department of Health and Human Services Office of Inspector General (OIG) issued a 627-page final rule which will serve to modernize and clarify Stark Law regulations. Thanks for reaching out. Too often, they have hindered, rather than . If an appraiser is hired, the appraiser's qualifications and experience must be considered if that appraisal will be relied upon. Record the following closing entries on page 19 of the general journal. Financial arrangements should be based on comparable data and should be set in advance by members who have no conflict of interests. In addition to fair market value, most applications of the anti-kickback statute and Stark law also require commercial reasonableness. This would be incorrect. Noteworthy 2021 stark law revisions and modifications: specifically areas impacting provider compensation and transactions valuation. Modified the rule related to profit sharing and productivity bonuses such that distribution of profits from designated. The Department of Health and Human Services (HHS) defines commercial reasonableness as a sensible, prudent business arrangement, from the perspective of the particular parties involved, even in the absence of any potential referrals. Clarifies the period of disallowance for referrals and billing following a self-referral law violation, the satisfaction requirements for set-in-advance compensation, when an entity may direct a physicians referrals to a provider, the requirement for exclusive use of office space/ equipment, and the exception for payment by a physician to an entity. That determination may be fairly conservative and well within a reasonable range, but if said physician is the second of two medical directors for this service and the duties are already handled by the first medical director so the second is not needed, then the $150 per hour medical directorship, while fair market value is not commercially reasonable. Many individual physicians believe that fair market value is met so long as relevant benchmarks exist. ), commonly referred to as the Stark law, is a set of regulations that pertain to physician self-referral under current United States (US) federal law. Office-based primary care has been significantly affected as offices were closed for a period of time and then had to adjust to telehealth and virtual visits.
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